Coopetition in the Soc Industry: the Case of Qualcomm Incorporated
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Journal of Open Innovation: Technology, Market, and Complexity Article Coopetition in the SoC Industry: The Case of Qualcomm Incorporated Yona Kwon, Dahee Kang, Sinji Kim and Seungho Choi * Ewha School of Business, Ewha Womans University, 52 Ewhayeodae-gil, Seodaemun-gu, Seoul 121791, Korea; [email protected] (Y.K.); [email protected] (D.K.); [email protected] (S.K.) * Correspondence: [email protected]; Tel.: +82-2-3277-4138 Received: 3 December 2019; Accepted: 29 January 2020; Published: 2 February 2020 Abstract: This study uses the lens of competitive dynamics to examine the coopetition process, which combines both cooperation and competition, employed by Qualcomm within the SoC (System on a Chip) design market related to smart devices. Qualcomm succeeded in developing the first SoC, which integrated GPS (Global Positioning System) and other software, and during the process of developing mobile chips has simultaneously cooperated and competed with competitors. In particular, Samsung, which began as a customer of the firm, has since become its competitor. By conducting descriptive case analysis, this study shows a coopetition process in the SoC industry and supplemented a coopetition study with the actual exemplary coopetition case. Keywords: Competitive Dynamics; Coopetition; System on Chip Industry; Qualcomm 1. Introduction In a highly competitive environment, firms must continuously innovate to gain a competitive advantage over other firms. Although most of the firms seem to compete against each other to maintain their advantage continuously, firms also often cooperate with their competitors even while competing. Especially in a high-tech industry where technological innovation and change in products are fast, it is difficult to cope with global competitors with a single, static strategy. In other words, a dynamic competition and cooperation between firms is necessary to sustain a firm’s competitive advantage. This has led some researchers [1] to claim that within a complex business environment, firms should act outside of their boundaries and cooperate with other firms through “open innovation” by interacting with other firms or players in the market, as surviving alone in a competitive business environment is difficult to achieve. Coopetition is a term that refers to the simultaneous coexistence of cooperation and competition. The term, based on game theory and popularized by Nalebuff and Brandenburger [2], was coined to reflect the reality of business management today as companies must respond rapidly to changes in their business environment [3]. The dynamics of coopetition behavior assume that firms cannot survive alone in the changing environment and that interdependencies among firms create value for those firms [3–5]. Coopetition has been previously discussed in various theoretical and empirical studies, which have shown, for instance, that coopetition can be a source of innovation [6,7], and there are also tensions between cooperation and competition [8]. This case study is intended to complement that literature by looking at the actual changes in competitiveness and performance created by one highly successful firm’s coopetition and demonstrating that these actions occur in complex competitive dynamics and influence the firm’s strategic behavior. Throughout its history, Qualcomm has not only developed innovative technology but also survived with cooperation with other companies. The competitive behavior of Qualcomm thus should be understood as dynamic interactions in which Qualcomm both competes with and cooperates with J. Open Innov. Technol. Mark. Complex. 2020, 6, 9; doi:10.3390/joitmc6010009 www.mdpi.com/journal/joitmc J. Open Innov. Technol. Mark. Complex. 2020, 6, 9 2 of 18 its rivals. These interactions with their rivals do not occur alone but are intertwined and interrelated with one another. Interactions with a firm’s rivals affect firm’s survival and can lead to destructive or productive results [9]. This study focuses on the cooperation and competition between Qualcomm and Samsung and how firms employ coopetition to gain a competitive advantage. Coopetition occurs in two different but interdependent ways regarding the cooperative and competitive firm activities. Although these two processes may seem distinct, simultaneous competition and cooperation exist among firms. In this study, coopetition was analyzed over time. It conducted a comparative case analysis of the two firms to examine how the coopetitive process actually evolves and changes over time. This study contributes to coopetition research by analyzing and describing how specific firm events and external environmental changes affect competition and cooperation over time. In particular, we identified that competitive actions and reactions of firms are the key foundations of the change and evolution of the coopetitive process. The competitive actions of firms bring competition as well as cooperation reactions from their competitors. The choice of competitive and cooperative reactions depends on how other firms interpret and perceive other firm’s competitive activities. To achieve this research goal, we first review the literature relevant to the concept of coopetition and then analyzes the case of Qualcomm’s coopetition behavior with Samsung as an example of this dynamic. By analyzing the coopetition process of Qualcomm, this paper provides deeper insights into the dynamics of coopetition behavior. 2. Literature Review The case of Qualcomm shows the process of innovation and coopetition achieved throughout the growth of the SoC industry and thus helps to link the existing literature of coopetition to the real-life situation from this case study. This case study is established upon the competitive dynamics approach that mainly focused on the coopetitive behavior of the firm. 2.1. Competitive Dynamics Existing research into competitive dynamics has assumed that competition is a most crucial facet of competitive dynamics, and therefore, focused on the competitive moves of a firm [10] and the specific behaviors and responses of competitors [11]. As this literature has shown, the management process of firms becomes increasingly competitive during such phases as launching new products, increasing market share, and securing customers. At the same time, as researchers have noted, firms sometimes also partner and make alliances with competitors in order to compete [12]. The key issue explored by research on competitive dynamics is how a particular competitive behavior affects a firm’s competitive advantage and competition in the long run [9]. As this body of research has demonstrated, the environment and conditions in which firms compete differ across industries and time periods. In those different conditions, competitive interactions among firms lead to certain firm performance. The action and reaction of firms are interdependent to the extent their strategic actions affect firm performance [13]. This case study, while examining the ways in which the specific industry dynamics shaped their competitive actions, also enlarges upon those findings by analyzing the ways in which that competition was affected and mediated by strategic coopetition with its rivals. 2.2. Coopetition As globalization increases competition and the life cycle of products and technologies shorten, most tech companies can no longer effectively respond to the changes in the business environment based solely on their internal resources or abilities. Therefore, many firms have chosen to work closely with various other businesses to improve and sustain their own competitiveness [14]. In practice, alliances between firms have become widespread regardless of industry. According to a recent investigation, such a combination of competition and cooperation has led to innovative outcomes and J. Open Innov. Technol. Mark. Complex. 2020, 6, 9 3 of 18 economic growth [15]. Bengtsson et al. [16] defined this combination, coopetition, as “a process based upon simultaneous and mutual cooperative and competitive interactions between two or more actors at any level of analysis—whether individual, organizational or other entities”. The focus on concurrent competition and cooperation is the key issue explored in the literature on coopetition. It can be understood as a cooperative strategy that is applied to a cooperative and competitive relationship between firms and their competitors. Coopetition allows companies to share resources, technology, and know-how with their competitors. It enables them to enjoy all the advantages of cooperation and competition by maintaining a cooperative system and competing with each other to improve their performance in other fields [17]. As the era of technological convergence, interfirm competition or cooperation is now considered as an inevitable means of survival in the global competitive market. Moreover, the increased interconnection between global organizations makes coopetition a vital source of a firm’s strategy. According to Lado et al. [18], the pursuit of coopetition could lead to positive results. When firms strive to achieve balanced competition and cooperation, which delineates syncretic rent-seeking behavior, they could have various options for their strategic choice that result in having a competitive advantage. Cooperation between competitors has multiplied during the past decade [16]. Coopetition is reinforced by the “market commonality and resource asymmetry” among global rivals [17]. The commonality within the market leads to more competitive actions while the asymmetry within resources leads to